Ohio’s “Recovery” Due to Shrinking Labor Force

Ohio’s unemployment rate paints a misleading picture of the state’s economy, an Opportunity Ohio report and separate Media Trackers analysis reveal. The unemployment rate reported by the U.S. Bureau of Labor Statistics (BLS) dropped from 10.6 percent in July 2009 to 7.2 percent in August 2012, but the change resulted from a shrinking labor force as opposed to strong job growth.

In a paper released October 23, Opportunity Ohio founder Matt Mayer wrote, “when accounting for all the workers who are unemployed and who have left the labor force, the true unemployment rate in Ohio is most likely 9.3 percent.”

BLS data show that employment in Ohio bottomed out at 5,255,784 – lower than at any other time in the past decade – in December 2009. By August 2012, Ohio had regained just 82,127 of the more than 350,000 jobs lost after the national housing bubble burst.

According to the National Bureau of Economic Research (NBER), the recent U.S. recession ended in June 2009. Ohio’s unemployment rate, however, peaked at 10.6 percent in July 2009 and remained there through January 2010.

In July 2009, a total of 5,309,648 workers were employed in Ohio. Ohio’s total employment had increased to 5,337,911 by August 2012, adding only 28,263 jobs in 37 months.

Despite paltry job growth, the reported unemployment rate dropped from 10.6 percent to 7.2 percent during the same period because Ohio’s August 2012 labor force of 5.75 million was 3.1 percent smaller than the July 2009 labor force of 5.94 million.

BLS labor force and employment figures clearly demonstrate that the state’s economy is not roaring back as a 3.4 percent drop in the unemployment rate might suggest, but is in fact recovering at a sluggish rate while tens of thousands of Ohioans leave the labor force.

In February 2009, U.S. Senator Sherrod Brown (D-OH) voted for and President Obama signed the American Recovery and Reinvestment Act (ARRA), Obama’s $787 billion “stimulus” spending bill. Since then, the bill has resulted in over $7.1 billion in federal funds being sent to Ohio.

After ARRA became law, Ohio’s economy lost another 159,182 jobs on its way down to the December 2009 trough. Although ARRA job creation reports are scattershot at best, the cost to taxpayers for each ARRA job would be $86,451 if the bill was given credit for every job gained and blame for none of the jobs lost.

These and other Washington programs amount to layers of costly bureaucracy on top of state “job creation” handouts offered by the Ohio Department of Development and, since Governor John Kasich (R) took office in January 2011, JobsOhio.

Ohio’s tepid growth in the face of unprecedented government spending demonstrates why politicians speak in terms of jobs “created or saved.” When government spending policies have miserable results, it’s difficult to disprove speculation that the economy could have been even worse had tax dollars not been thrown at the perceived root causes.

“From 2008 through August 2012, Ohio’s labor force lost more workers than every state except Michigan,” Mayer explained in the October 23 Opportunity Ohio report. “From 2010 to August 2012, Ohio’s labor force lost more workers than every state.”

“Ohio’s unemployment rate is being driven down by the shrinking labor force, not by job gains,” Mayer concluded.